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Business Ethics 101 in 2013

Written by: MainStreet04/04/13 - 5:24 PM EDT

By Kerri Fivecoat-Campbell

NEW YORK (MainStreet) --In decades past, bad business ethics might have been defined as stealing a stapler from the office, taking a nap at your desk after lunch or, for executives, skimming off the top.

And though business ethics today involves the same examination of moral and social responsibility in practices as in years gone by, what has changed is the introduction of the many new ethical breaches connected with technology and how ethics are recognized and handled in the workplace.

Diane Swanson, chair of the business ethics education initiative at Kansas State University in Manhattan, Kans., says that business ethics, as an industry, has been an evolutionary process. While there were ethical practices previously, the business ethics consulting business really began in the 1980s during the savings and loan scandals and widespread greed and corruption personified by Gordon Gekko from the movie "Wall Street."

"This led to longer federal sentencing guidelines, which led to the creation of the ethics consulting industry," says Swanson. "Companies created a code of ethics, which helped in the sentencing, if you had a code of ethics, the sentences were shorter."

She said the industry was created with compliance as a focus and now has morphed into what most companies recognize today as a more proactive approach in risk management.

"That has led us to the consideration of what is an ethical culture in organizations today," says Swanson. "Companies are finding if a company has strong ethics at its core, the risk is diminished by that alone."

Abbot Martin, research director for CEB, a research advisory firm in Washington, D.C. that focuses on risk and compliance, says that the company has surveyed more than a quarter-million employees around the world from 2007 to the present and found that overall, companies that had higher internal ethical standards also realized higher returns.

The company looked at many different types of violations, including alcohol and drug use in the workplace, misappropriation of time, conflict of interest, fraud, harassment, discrimination and data privacy violations.

The study found that companies that spent time building a high integrity corporate culture and had fewer incidents of these types of violations saw a 7.9% average annual shareholder return, as opposed to 2.1% at other companies.